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Secret memo on Loral deal


Despite an ongoing FBI investigation into the unauthorized transfer
of advanced missile-guidance technology to China, Loral Space &
Communications Corp.
requested and received
Clinton administration approval to sell communications satellites to
Beijing in 1996, a secret National Security Council memo obtained by
WorldNetDaily shows.
Congressional investigators have raised concerns that the satellite
technology shared with the Chinese may have allowed them to improve
their capability of launching intercontinental ballistic missiles. China
currently targets 13 such nuclear-tipped missiles at the United States.
Loral Chairman Bernard Schwartz donated more than
$1 million to the Democratic National Committee, according to Federal
Election Commission records, and has recently made contributions to
Hillary Clinton’s campaign for the U.S. Senate in New York. The $1
million contribution was the single largest individual donation to the
DNC that year.
The July 1, 1996, action memo to National Security Adviser Anthony
Lake, obtained through an intelligence agency source, reveals Loral
requested that President Clinton delay a pending waiver for a satellite
“In mid-June, Globalstar’s parent company, Loral requested that we
temporarily delay evaluation of their request for a national interest
waiver for this project,” the memo explains. “The company has now asked
us to resume processing of their application, and State has confirmed
its support for approval of the license.
“The Dept. of State, with the concurrence of the Departments of
Commerce and Defense and the Officer of Science and Technology Policy,
recommends that the President report to Congress that it is in the
national interest to waive the Tiananmen Square sanctions in order to
allow the licensing of communications satellites and related equipment
for export to China,” states the memo.
President Clinton signed the waiver for Loral later that month.
Loral was then under investigation for the loss of an encryption control
board from a Loral Intelsat satellite that crashed in China. The
missing board prompted an investigation by the FBI.
According to documents obtained from the U.S. Commerce Department,
Loral was aware that the exported satellite systems were developed from
American military equipment. Loral documents obtained from the files of
the late Commerce Secretary Ron Brown included a folder labeled “for
Secy. Brown” with a page titled “Commercial Applications Of DoD
Technology.” The Loral document lists “Intelsat,” “Cellular —
Globalstar” and “Direct Broadcast Satellite” technology along with a
variety of other products developed from Department of Defense projects.
In addition, a 1996 State Department report contradicts Clinton
administration claims that advanced communications exports to China were
“civilian” projects. The report states that the Chinese army was keenly
interested in obtaining Loral Globalstar satellite technology and the
Loral purchase was possibly being financed by Chinese billionaire, Li
Ka-Shing. The 1996 Department report was written by then-Ambassador to
China James Sasser, a former U.S. Senator from Tennessee. The 1996
State Department report was obtained through the Freedom of Information
The report states: “The PLA (People’s Liberation Army) has for some
time been discussing with the MPT (Ministry of Posts and
Telecommunications) the possibility of using frequencies allocated to
the PLA for establishing a mobile phone network based on CODE DIVISION
The 1996 report written by Sasser alleges that the Ministry of Posts
and Telecommunications (MPT) and Li Ka-Shing were both directly involved
with the People’s Liberation Army in financing the Loral export to
“Already, foreign companies are interested in the new PLA-backed
entity that is likely to emerge over the next year,” states the report.
“Recent press reports indicate that Hutchison Whampoa may be involved
with the PLA about possible funding options.”
Li Ka-Shing owns Hutchison Whampoa Ltd. and is reportedly the sixth
richest man in the world. Hutchison Whampoa is the shipping company
awarded the contract to control the ports at both ends of the Panama
Li Ka-Shing has been described by intelligence sources as a “Howard
Hughes” for the Chinese Military Intelligence Department, or MID. U.S.
Army Southern Command documents on the Panama transfer noted that Li
Ka-Shing was an “indirect” threat to the United States.
Loral Globalstar satellite cellular phones use a unique
communications technology originally built for the U.S. military called
Code Division Multiple Access (CDMA). The July 1996 waiver signed by
Clinton allowed Loral to export Globalstar CDMA technology to China.
The Clinton waiver also allowed for China to acquire a secure
telemetry control ground station for the Loral Globalstar satellites.
The station is currently operating just outside of Beijing.
Loral’s Globalstar is not the only satellite system under fire for
alleged illegal transfers to the Chinese army. The State Department
recently accused Motorola’s Iridium system of passing significant
missile technology to China.
However, neither satellite system seems to be a big hit with
consumers or Wall Street investors. The ill-fated Iridium satellite
phone system declared bankruptcy last year and now plans to write off
the entire $5 billion space-based system. The extraordinary process of
de-orbiting and destroying the array of 66 satellites is under way as
Iridium operations shut down.
“Iridium was one of the more colossal screw-ups in history,” says
Douglas Humphrey, head of Cidera Inc., a satellite-based Internet
routing company. “The magnitude of the damage is not yet fully
realized. Wait a year or two. Iridium seriously damaged Wall Street
perceptions of satellites.”
According to an article, “Iridium, Overcapacity Worry Space
Industry,” published in Aviation Week & Space Technology, Humphrey
noted the big winners would be Loral and Schwartz.
“There’s not room for three to five Iridium-like systems, only one or
two,” the article noted. “… Bernie Schwartz built the cheap one
(Globalstar) and he will win.”
According to Hoyt Davidson, managing director at Donaldson, Lufkin &
Jenrette Investment Banking, Schwartz is always looking for investment
in his space systems.
“Bernie Schwartz always has a prospectus ready in his back pocket,”
noted Davidson in the Aviation Week article.
WorldNetDaily reported in 1998
that Globalstar, the Loral subsidiary, accepted full partnerships and a
$37.5 million investment by two Chinese government-front companies.
That year, Loral’s Globalstar Limited Partnership division finalized
a deal with China Telecom and CHINASAT, both wholly owned by Beijing’s
Ministry of Information Industry.
“The addition of China Telecom as a full partner solidifies
Globalstar’s commitment to bringing the promise of mobile satellite
communications to China’s 1.2 billion people,” said Schwartz in a public
statement in 1998.
The deal specified that Beijing’s government companies would manage
all Globalstar operations in China, according to Schwartz. With the
world’s largest population and one of the fastest-growing economies, the
deal was estimated to increase Loral’s revenues by $250 million
The telecommunications deal was the result of a meeting between
Schwartz and top Chinese officials made possible by a trade mission
coordinated by then-Commerce Secretary Brown in August 1994. Schwartz
met with People’s Liberation Army Gen. Shen Roujun.
Besides construction, operation and maintenance of a Chinese
telecommunications infrastructure, China Telecom lists among its
specific responsibilities “emergency communication during wartime”; the
construction and operation of government communications networks;
ensuring security in communication; exercising “centralized control over
public satellite communication” and “any duty that may be entrusted by
MPT” (Ministry of Posts and Telecommunications) or the new Ministry of
Information Industry.
“Allegations that Space Systems/Loral provided missile guidance
technology to the Chinese are false,” said Schwartz back in 1998. “SS/L
makes commercial communications satellites, not launch vehicles. The
company did not advise the Chinese on how to fix any problems with the
Long March rocket. All company employees were specifically instructed
not to provide any such assistance, and the company believes that its
employees acted in good faith to comply with the strict and complex
requirements of the export control laws.”
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